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How do you compare to industry standards?

The cost of payroll processing is often regarded as an unavoidable expense. For many organisations, payroll is often considered a low profile function and left out of the conversation when it comes to strategic improvement.

However, the irony is that the payroll function is where costs can be significantly reduced, and quite easily. It’s important to know if you are overspending and take into consideration the ‘hidden costs’ when calculating your payroll:

Salary costs

Payroll staff salaries and wages including superannuation

Technical Costs

Payroll time and attendance and employee self-service software and service costs

Other Costs

Consulting

Recruitment

Training

Stationary

Conference

Travel

Memberships

While companies often factor in technical costs when calculating the cost of the payroll function, they can often overlook other costs. Factors like payroll consulting, training, conference attendance and association memberships might seem harmless enough but they certainly add up.

The Australian Payroll Association 2016 Payroll Benchmarking Study found that the average costs per payslip for employers with more than 200 staff in 2016 are:

2016

Average technical per payslip

$4.13

Average salary per payslip

$11.52

Average other per payslip

$0.73

Average total per payslip

$16.38

Interestingly, the study showed that top performing companies have found a way to streamline their payroll technology and processing costs resulting in savings of up to 42%. This means that employers recording average or above average costs in delivering their payroll function can still potentially make big savings by improving their processes, technology and payroll team.

While current trends indicate a growing interest in full or partial outsourcing, this decision needs to be made in alignment with business goals. Some factors that need to be considered are the size of the company, as well as what processes are being outsourced and what processes still have to be completed by the employer. It’s also important to note that outsourcing payroll doesn’t outsource your employment obligations or responsibilities.

Payroll technology is an area where efficiency and costs vary greatly as well. Modern cloud based payroll systems reduce costs associated with maintaining a mainframe system. The level of system automation can also impact the amount of cost efficiency gained from reducing manual processes.

There is no silver bullet solution for reducing payroll costs as each organisation comes with a different set of needs. But one thing is for certain, you are unlikely to improve your payroll process or cost of the operation unless you measure your current efforts.